Commonwealth Development Corporation Bill (First sitting)

Debate between Stephen Doughty and James Duddridge

Committee Debate: 1st sitting: House of Commons
Tuesday 6th December 2016 Public Bill Committees

[Stephen Doughty]

Q You make a big point about the issue of prospective development impact and whether CDC can prove its impact. Were you concerned when you heard the earlier panel talking about investments in richer places that theoretically will lead to jobs for poorer people, as people perhaps move to cities and take advantage? Do you think that is a bit too hazy? Can you explain a bit more about where you felt the CDC could be doing better to demonstrate impact?

Tom McDonald: One of the things that struck me from the projects that I visited in Uganda and Kenya was the need for a portfolio approach. Some of the projects clearly will have more of a development impact, and some will clearly do better financially. Some of them are harder to measure than others, particularly if the investment is through a fund or an intermediary.

In the report we say that, despite Parliament having expressed some concerns in 2008 and 2009 about how CDC measures impact, CDC has still been a little slow to put together a comprehensive picture of the approach it would expect to take, together with DFID, to provide Parliament and the taxpayer with a good view of what impact looks like. I should say that we are not suggesting that there is some simple way of doing that. Measuring all the different indirect and direct effects of the investments is complicated. For example, to answer your question directly, there was a commitment in 2012 to put together a measure of what quality of employment would look like. It has not made much progress on that. It has plans in place to try to evaluate some of its major investments and to improve the impact reporting, but for us, it is about the pace and comprehensiveness of that reporting.

[James Duddridge]

Q May I ask Sir Paul Collier a question in relation to the amount of capital that CDC has? There seems to be a view that CDC can absorb about £1 billion a year. Given your work on urbanisation and the vast amount of infrastructure investment that is needed, do you think that CDC could be challenged to spend much more on an annual basis or to ramp up to that point? That relates in particular to funding the urbanisation that Africa needs to attract the companies that you referred to earlier.

Sir Paul Collier: Africa is going through a rapid and very necessary urbanisation. Africa’s future is urban, but not all cities are environments in which ordinary people can be productive. You can have a mega-slum. At the moment in Dar es Salaam, the modal enterprise has one worker: scale zero, productivity zero, specialisation zero—doomed. Cities need to become platforms where proper firms can function. They need energy supplies and decent connectivity. That is what the infrastructure is there to do, basically: energy and connectivity. That is expensive.

[Stephen Doughty]

Q CDC could spend £1 billion just in Dar es Salaam.

Sir Paul Collier: CDC needs to scale up and scale up fast. I am hesitant about tying it in knots trying to get precise measures for this and precautionary measures for that, when the reality is that there are no techniques out there. Everyone is trying to build better measures. The International Finance Corporation has just hired for the first time a chief economist at vice-president level, designed to do that. People are trying to develop techniques, but it is difficult. To my mind, CDC’s priority, now that it has got sound, motivated management, needs to be to scale up. The task ahead for Africa is to get both the infrastructure and the private firms in before it is too late.

[James Duddridge]

Q Should not we be encouraging it to give more than £1 billion a year?

Sir Paul Collier: Yes, of course. The future of aid is to get decent firms to go to places where they will not make much money until there are lots more of them.

Commonwealth Development Corporation Bill (Second sitting)

Debate between Stephen Doughty and James Duddridge

Committee Debate: 2nd sitting: House of Commons
Tuesday 6th December 2016 Public Bill Committees

[James Duddridge (Rochford and Southend East) (Con)]

It is actually £1 million, but my amendment is probing, as the hon. Gentleman’s is. What the hon. Gentleman is getting wrong—I do not think wilfully—is that the Minister does not need to present a business case and, indeed, he should not present a business case now. This is a figure that might be reached on the basis of drawdown and a request of the CDC with a business case which he will then analyse.

[Stephen Doughty]

But the CDC has not made such a request and, as the NAO said this morning, it is the cart before horse. That is the problem. I do not expect the Minister to provide a detailed analysis of every single project that we will invest in over the next 10 years, but a paragraph in the explanatory notes and some vague assurances about market demand are simply not good enough. We are talking about spending, potentially, billions of pounds of taxpayers’ money. Would we suggest the same amount went to a non-governmental organisation such as Oxfam or indeed the World Bank?

--- Later in debate ---

[Stephen Doughty]

rose—

[James Duddridge]

I give way.

[Stephen Doughty]

I am sure that my hon. Friends on the Front Bench will confirm that they are in full support. In fact, we have discussed the amendments at great length. It is simply a procedural point. I was not aware until I was informed by the Clerk earlier about the ordering of names, despite having been on many Bill Committees. I was informed by the Chair at the start that I would be called first because my name came first in the list. I assure the hon. Gentleman that the amendments have been fully discussed with the Front Benchers and have their full support. No doubt the Front Benchers will speak to the amendments in due course.

[James Duddridge]

Fantastic. My Front Bench also seems to be aware of that situation. I look forward to listening to the SNP’s contribution on amendments 3 and 4 and to seeing how its Front Bench is taking things forward.

Amendments 1 and 2, which I tabled, are probing amendments. I had taken myself off to table amendments that increased, not decreased, the amount and was told that while it would be permissible to table them, it would not be permissible for them to be selected, because of the money resolution. I therefore want to enter into a debate about whether it is the right amount. I have tabled an amendment that would make it lower, rather than higher, although I believe that there is capacity to invest more money in CDC, and faster. I do not share the scepticism of others around the table. I hope to see the £6 billion target reached earlier, rather than later.

This morning’s evidence session was incredibly useful and covered a lot of the points and queries that I would have wanted the Minister to address in his remarks. With that in mind, I will not detain the Committee any further.

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[Stephen Doughty]

I am conscious of your admonishment not to repeat the arguments I made when I moved amendment 6, Chair. I will discuss a few other issues, specifically around the use of a statutory instrument in this way, the value of it and the way in which other replenishments and funding rounds are agreed for development finance institutions.

Many of the arguments that we have already discussed also apply to amendment 7, although I will come to one that we did not cover, but the fundamental issue is whether the Government should be given this level of power. There is a debate to be had about how much we give CDC, over what time period and with what caveats, but giving the Secretary of State the power to come back at the time of their choosing, which could be next week or in 10 years’ time, and not just increase the amount by another couple of billion but double it, is very significant. I am always extremely reluctant to grant Ministers such powers, whether they are financial powers or Executive powers.

We all know that despite the procedures of this House and the fact that many Members take an active interest in Delegated Legislation Committees and statutory instruments, secondary legislation often does not receive the same scrutiny as primary legislation. It often goes through on the nod or is scheduled on funny days when Members are not available. Obviously it is the responsibility of all Members to turn up and hold the Government to scrutiny, but given the debate we have had on the matter in this Committee and in the legislative process, it seems odd not to ask the Government to come back later with another Bill.

Let us not forget that a Bill was not required from 1999 to today, when only £1.5 billion was used. Even if there was an expansion, not to require another Bill for quite a significant period and just to put through another uptick, perhaps by a mischievous future Secretary of State or the current one, seems very odd.

I must come back to the Minister’s point about other development finance institutions and the processes they are subject to. Most development finance institutions, including the global health fund, the World Bank’s International Development Association, individual development banks and UN agencies, tend to go through replenishment rounds. They agree a set period, put out strategies and requests to donors for funding and come back on a three or four-year cycle. Those requests have to be justified so that we can scrutinise them and say whether we agree. Indeed, that is the very purpose of the multilateral aid review: to look into whether we are giving money in all the right areas and where we think some development finance institutions are underperforming.

I am concerned that, although CDC may be doing better in line with its 2012 plan, making improvements and shifting its focuses, as we have heard from the Minister, without any ability to come back and have a full, thorough debate about the nature of the organisation, the caveats that are placed on it and the overall cap of funding that it should receive, we are giving Ministers a completely open-ended power to increase that funding very significantly. Let us not forget that £12 billion is equivalent, roughly, to the annual aid budget—I know the Minister has made it clear that it will not be used in one year, but it is a very significant sum of money. We ought to be acting with real caution when giving Ministers such powers.

It would help if the Minister could be clear about the time periods he is looking at. If he is talking about 20 years, let us hear him say that. I would still be nervous even so, because a future Secretary of State or Minister might change their mind, but it would help to smooth the debate if we heard that statement from the Minister.

The other issue that the Committee did not discuss in our consideration of the previous amendment was the focus on sectors. I mentioned the problem of multiplying potential shifts into certain countries or regions, away from stated objectives; that argument applies equally to sectors. If we increased the limit to £12 billion, it would be magnified even further. I was concerned to receive an answer from the Minister today about certain sectors in which he stated that the CDC continues to disburse into some really questionable areas. One is private, fee-paying education—the CDC’s portfolio value in 2015 was £56.9 million. Another is private healthcare providers and services, in which the CDC had a total portfolio value in 2015 of £117.9 million. Its portfolio value in extractive industries—metals and mining—was £9.3 million; the portfolio value in palm oil, which we have discussed in relation to the Feronia case and other matters, was £20.4 million; the value of the investment in real estate is £147.7 million; and in fossil fuels, the current value of CDC’s portfolio is £250 million. That seems to me to be at complete odds with DFID’s wider development objectives for Government coherence.

To come back to the nature of the amendment—I can see Ms Ryan looking anxiously at me—those sorts of issue will be magnified even further by rapid increases in the budget without caveats being placed on it. Ms Ryan, you have rightly said that were we to vote on the amendment, and were it to pass, we would not get a chance to discuss some of those other matters, but the power being given here without assurances is simply not acceptable and I have great concerns about giving that power to Ministers.

[James Duddridge]

I shall raise only two points. I made all the comments I could possibly make on amendment 2 in the previous debate, so I will not detain the Committee further. I am sure it is terribly bad form, but I hope, Ms Ryan, that you will not mind, if we are still sitting when the business in the Chamber gets to the Adjournment debate, which is on rail services in my constituency, Southend, that I rush off before any possible vote.

Commonwealth Development Corporation Bill

Debate between Stephen Doughty and James Duddridge

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 29th November 2016 Commons Chamber

[James Duddridge (Rochford and Southend East) (Con)]

rose—

[Stephen Doughty]

rose—

--- Later in debate ---

[Stephen Doughty]

As I shall come on to explain more fully, there has been a significant change and there has been a narrowing, but there is still a significant difference. If we look at the bulk of the spending still being in India, we see a significant divergence from DFID’s priorities, as I shall come on to show. We were told that aid to India had ended, but apparently it has not.

This is also significant when coupled with an answer I received to a parliamentary question. I discovered that the amount of aid—ODA—to be spent by Departments other than DFID is set to increase from 18% this year to 26% in 2019. That is over a quarter of our aid spending going through Departments other than DFID. Even if we focus on the lower end of the implied proposal to spend billions extra via the CDC by the end of the spending review—let alone the £12 billion—we could be looking at anywhere from 35% to 45% of the DFID budget being spent, but not by DFID in the traditional sense. If the Secretary of State used her full power and more quickly than expected, it could be even higher. It is particularly ironic that the Secretary of State who promised us greater effectiveness, transparency and accountability in our aid spending appears to be willing to hand over billions of our aid funding to less transparent and less accountable parts of government.

[James Duddridge]

The hon. Gentleman seems to be implying that aid spent through other Departments is a bad thing. He is shaking his head, which is good, because far from being a bad thing, I would view it as a good thing. If we are helping education institutions in developing countries, we should use the expertise in our Department for Education. If we are looking at tackling local government, it should not be looked at through the DFID lens, but should involve our expertise. The key thing is having the same standards across those Departments and meeting the high quality that DFID deploys.

[Stephen Doughty]

I was shaking my head because I agreed with much of what the hon. Gentleman was saying, but my question is about the volume—the amount—and the fact that it is increasing so rapidly. It is well known that many other Departments have looked enviously at DFID’s budget and have attempted to take parts of its cash for many years. My questions are these. Is the aid being spent effectively; is it being used in accordance with the correct principles; and is it coherent across Government policy? As the hon. Gentleman will know, there are some fantastic examples of joint units involving the Foreign Office and DFID, but over a quarter of our aid budget is being spent on a massive increase, and that is a big issue.

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[Stephen Doughty]

Indeed. I apologise for not being present at that meeting, but, as you will know, Madam Deputy Speaker, I had other commitments at the time. Obviously, the hon. Lady cannot attend all the meetings of all the groups in the House at any time either; she and I are both busy people. I hope that the Committees will investigate those matters, not least because of the volumes that we are talking about, but also because of the lack of transparency when it comes to documentation and the ability to scrutinise CDC’s spending, not least through its use of tax havens.

These dramatic shifts—under the cover of a “minor technical change” that we should all rush through in the House—must always set the alarm bells ringing for those of us who seek to scrutinise the Government and their decisions. I do not want to spend long on this, but we must feel additional alarm when we look at the agenda of the Secretary of State and consider what she has said about the Department being scrapped and about money being “stolen” and squandered. She does not like some of the headlines that have appeared in the Daily Mail. Obviously, she does not like the headlines that have appeared in newspapers such as the Financial Times. However, we are now seeing wild claims and accusations in the right-wing press which are clearly coming from her Department. Indeed, her special adviser has previously called for the 0.7% target to be abandoned, and in 2013 in The Sun described aid as an

“unaccountable, bureaucratic and wasteful industry”.

Why does all this matter to the Bill? I believe that, faced with the legislative and political constraints of the cross-party support for the 0.7% aid target, the Secretary of State has opted for a stealthier route and has chosen to undermine the Department by diverting and reclassifying aid. I appreciate that others may not share my sense of scepticism, so let me now deal with three practical objections to the Bill. The Secretary of State said that she wanted facts, so let us have some.

I should make it clear at the outset that I am not opposed to the existence of a development finance institution of the CDC’s nature, or to its playing its part in our portfolio of international development efforts. Nor, obviously, do I oppose the funding of private sector projects. The development of a vibrant private sector, key infrastructure and the support of new and emerging businesses in the world’s poorest countries should be a key part of any balanced portfolio of development assistance, alongside investments in basic public services such as health, education, water, and support for agricultural improvement to tackle hunger and nutritional challenges.

The Secretary of State likes to give us the impression that she is the only person ever to have realised the importance of private sector development and trade to tackling poverty and promoting economic development, but the fact is that both have been at the heart of DFID’s work since it came into being, under Governments of all political persuasions. Supporting trade is crucial to international development.

[James Duddridge]

I totally agree with the hon. Gentleman’s point that economic development has been important to DFID, but does he agree with me that successive Governments have been wholly unresponsive to co-ordinated work on economic development, whether we call it prosperity or trade? Successive Governments have not pulled that together and grabbed the opportunity, which could really help to grow continents such as Africa out of poverty. Much more should be done, and this House should be holding the Government and future Governments to account on this, and ask them to do more, not less, with the private sector.

[Stephen Doughty]

It is a mixed record. We had a joint DFID-DTI—as I think the Department was called then—Trade Minister, my hon. Friend the Member for Harrow West (Mr Thomas), who did a lot of good work in trying to bring those things together, ensuring investment went to key infrastructure projects, different corridors in Africa and elsewhere, but it is a mixed record and the hon. Gentleman makes an important point.

There are many CDC investments that I and others welcome, which are well run and have delivered poverty-reducing outcomes in the poorest countries. We have heard about some of them today, such as those in Sierra Leone and Uganda. Indeed we were with the National Audit Office earlier today talking about some of the projects it had visited which clearly do justify our investment.

But where is the robust business case for such a large increase of billions of pounds of taxpayer spending? Why has this Bill been published before a CDC investment strategy? In the explanatory notes, the Secretary of State describes forecast market demand as the justification for the Bill. However, she has not explained this at all there; neither has she done so today, and nor did she in answer to a parliamentary question I put to her. I asked her to explain this concept of forecast market demand, but instead of an assessment that might justify this spending of up to £12 billion of taxpayers’ money, I was given some classic development waffle, such as:

“As set out in the UN’s Global Goals, urgent action is needed to mobilise”.

The answer did not go into any level of detail that we would expect on the spending of such a considerable sum of money.

Let me also be clear that, as Members may have gathered earlier, I am also critical of a whole series of actions and policies at the CDC that I am sorry to say occurred under the previous Labour Government; the sell-off of Actis was mentioned, and there was also excessive remuneration, and massive investments made in markets that already attracted foreign investors—which incidentally is still going on. These are just some of the issues that should have inspired tougher intervention. To give credit where it is due, many of the actions that the right hon. Member for Sutton Coldfield (Mr Mitchell) took in agreeing that new strategy took us away from some of the mistakes made in the past, but my question is whether they have gone far enough in justifying such a huge increase in the funding.

We should look at what the NAO said. Yesterday’s report noted:

“Our previous scrutiny of the Department’s oversight of CDC led to important, positive changes.”

It points to improvements in financial performance, organisation and prospective—let us return to that issue in a moment—development impact, as well as the clamping down on executive remuneration. The NAO also agrees that the strategy set by the Department in 2012 has been met.

However, as my hon. Friend the Member for Bridgend (Mrs Moon) pointed out, the question for the House today is not merely whether the CDC has made improvements on a previous record deeply mired in controversy, or whether it is now adhering to the strategy set for it—which we can argue was right or wrong—in 2012; the question before us is whether a good enough case has been made that the CDC is performing so well and so effectively that it should receive that volume of increase in funding versus other potential outlets for that development spending.

It is common sense that asking any institution, let alone one with a history of recent problems, to take on a significant increase in its funding over a short space of time may lead to less optimal outcomes and, at worst, failure. Were we proposing an additional £12 billion for those dangerous campaigning NGOs or the dastardly World Bank, or worse still the EU development funds, I have no doubt that the Government Benches would be crewed by the anti-aid brigade warning of the risk of our aid being “stolen” or squandered. But because it is for a more obscure part of our development finance architecture and has the words “private equity” and “private sector” associated with it, we seem to be willing to accept a lower level of assuredness.